Mike Zechmeister
Chief Financial Officer at C.H. Robinson Worldwide
Thanks, Scott, and good afternoon, everyone. As Scott mentioned, our Q1 results were impacted by a soft freight market. Prices for Surface Transportation and Global Freight Forwarding have been declining with the weakening demand and excess capacity. With these macro forces as a backdrop, our first-quarter total revenues of $4.6 billion declined 32% percent compared to our record-high of $6.8 billion in Q1 of last year. Our first-quarter adjusted gross profit or AGP, was down $221 million or 24.3% compared to Q1 of last year, driven by a 45% decline in Global Forwarding and a 16% decline in NAST. On a sequential basis, total company AGP was down 11%, including a 15% decline in NAST and a 6% decline in Global Forwarding.
On a monthly basis, compared to Q1 of last year, our total company AGP per business day was down 23% in both January and February, and down 27% in March as the typical seasonal acceleration in March did not materialize this year. So far in April, we've experienced similar freight market conditions to those we saw in March.
In our NAST Truckload business, our Q1 volume declined 3.5% on a year-over-year basis. Within Q1, average daily volume in March was weaker than January and February, resulting in a 1% sequential decline in Q1 compared to Q4 of last year. Our AGP per truckload shipment decreased 19% versus Q1 last year, primarily due to a decrease in our transactional or spot market Truckload AGP per shipment. During Q1, we had an approximate mix of 70% contractual volume and 30% transactional volume. Routing guide depth of tender in our managed services business, which is a proxy for overall market, declined from 1.7 in the first quarter of last year to 1.2 for the first quarter of this year, which is the lowest level we've seen since them the pandemic impacted second quarter of 2020.
The sequential declines in Truckload linehaul cost and price per mile that we experienced in Q2 through Q4 of last year, continued in Q1. However, the declines in Q1 were the largest that we've seen in over 10 years on a percentage basis. In Q1, we saw a 28.5% year-over-year decline in our average Truckload linehaul cost per mile paid to carriers, excluding fuel surcharges. Our average linehaul rate or price billed to our customers excluding fuel surcharges decreased year-over-year by approximately 27.5%. With the price decline coming off a higher base than cost, these changes resulted in a 20.5% year-over-year decrease in our NAST Truckload AGP per mile.
Market conditions in our Global Forwarding business were also soft behind weakened demand and plenty of capacity, combined with the extended shutdowns around the Lunar New Year holiday. This contributed to significantly reduced import volumes and prices across the trade lanes for ocean and air freight.
In Q1, Global Forwarding generated AGP of $177.9 million, representing a year-over-year decrease of 45% versus the record-high for a first-quarter last year, which was up 50%. Within these results, our Ocean Forwarding AGP declined by $111 million or 50% year-over-year compared to 63.5% growth in Q1 of last year. The Q1 results were driven by a 41.5% decrease in AGP per shipment and a 14.5% decrease in shipments. Despite the soft market, our Forwarding business continues to have success adding new customers and strengthening its geographic diversity behind many of the investments made in technology and talent over the past several years.
In addition to our strength in the Transpacific trade lanes, our Forwarding team generated over 50% of new business AGP from customers outside of the US in Q1. Turning to expenses. Q1 personnel expenses were $383.1 million, down $30 million or 7.3% compared to Q1 of last year, primarily due to our cost optimization efforts and lower variable compensation. Our Q1 average headcount declined 2% versus Q1 of last year and 4% compared to our Q4 average. As another point of reference, our Q1 ending headcount declined approximately 6% compared to the end of Q4.
Our cost optimization and restructuring efforts that began in Q4 of last year continued into Q1 as we found more opportunities to help ensure a more competitive and sustainable long-term cost structure. As we indicated on our Q4 earnings call, we continue to expect our headcount to decline throughout 2023 as we streamline processes and leverage technology to allow our industry-leading talent to focus on more important work like growing the business. As a result of the progress on these cost optimization efforts, we are now lowering our personnel expense guidance for 2023 by an additional $100 million at the midpoint. We now expect our 2023 personnel expenses to be in the range of $1.45 billion to $1.55 billion compared to our previous guidance of $1.55 billion to $1.65 billion. This updated guidance excludes the Q1 restructuring expense and additional restructuring costs that we expect to incur during the year.
Excluding the restructuring charges in 2022 and 2023, the midpoint of our updated 2023 guidance for personnel expenses is now down approximately 12% year-over-year. These expense reductions are primarily long-term structural cost reductions with our lesser amount attributable to softer market conditions that we referred to earlier.
Moving on to SG&A. Q1 expenses of $141.5 million were down $5.9 million compared to Q1 of last year, primarily due to a decrease in credit losses and a reduction of purchased services including temporary labor. We continue to expect our 2023 SG&A expenses to be about $575 million to $625 million. 2023 SG&A expenses are expected to include approximately $90 million to $100 million of depreciation and amortization expense.
As you recall from our Q4 earnings call, we committed to $150 million of net cost savings by Q4 of this year compared to the annualized run rate of Q3 last year. Our updated total operating expense guidance for 2023 now represents approximately $300 million of net cost savings compared to the annualized run rate in Q3 last year. As mentioned earlier, the majority of the expense reductions are expected to be long-term structural changes to our cost base.
Q1 interest and other expense totaled $28.3 million, up $14.1 million versus Q1 last year. Q1 of 2023 included $23.5 million of interest expense, up $9 million versus the prior year due to higher variable interest rates. Q1 results also included a $9.6 million loss on foreign currency revaluation and realized foreign currency gains and losses, up $8.1 million compared to Q1 last year, driven by the translation impact of the various foreign currency-denominated intercompany exposures that we had in Q1. As a reminder, our FX impacts are predominantly non-cash gains and losses which is why we're not actively hedging them to reduce volatility.
Our Q1 tax rate came in at 13.5% compared to 18.4% in Q1 of 2022. The lower tax rate was driven primarily by the incremental tax benefits that we typically see from stock-based compensation deliveries in Q1 as well as additional US tax credits and incentives in proportion to the lower pretax income. We continue to expect our 2023 full-year effective tax rate to be 19% to 21%, assuming no meaningful changes to federal, state or international tax policy.
Q1 net income was $114.9 million and diluted earnings per share was $0.96. Adjusted or non-GAAP earnings per share excluding the $3.7 million of restructuring charges was $0.98, down 52% compared to Q1 of 2022 which was up 60% versus the prior year. Turning to cash flow. Q1 cash flow generated by operations was $254.5 million compared to $13.9 million of cash used in Q1 of '22. But the $268.5 million year-over-year improvement was driven by a $235 million sequential decrease in net operating working capital in Q1, driven by the declining cost and price of Ocean and Truckload in our model.
Conversely, Q1 of last year included a $289 million sequential increase in net operating working capital as costs and prices were rising. Over the past three quarters as the cost and price of purchased transportation has come down, we have realized the benefit to working capital and operating cash flow of more than $1.2 billion. That benefit highlights some of the inherent resilience in our model. In Q1, our capital expenditures were $27 million compared to $26.2 million in Q1 of last year and we continue to expect our 2023 capital expenditures to be in the range of $90 million to $100 million.
We returned $125 million of cash to shareholders in Q1 through $73.4 million of cash dividends and $51.2 million of share repurchases. The cash returned to shareholders exceeded net income, but was down 50% versus Q1 last year, driven by the $101 million of cash used to reduce our debt.
Now on to the balance sheet highlights. As we have demonstrated through the ups and downs of the highly cyclical freight market, the strength of our balance sheet and business model makes us a reliable partner for our customers and allows us to invest through the cycle. Our customers value the stability and reliability that we provide as they work to optimize their transportation needs.
We ended Q1 with approximately $1.5 billion of liquidity comprised of $1.22 billion of committed funding under our credit facilities and a cash balance of $239 million. Our debt balance at the end of Q1 was $1.87 billion, down $293 million versus Q1 last year. Our net debt to EBITDA leverage at the end of Q1 was 1.39 times, up from 1.29 times at the end of Q4. Our capital allocation strategy includes maintaining an investment-grade credit rating to allow us to optimize our weighted average cost of capital.
With the anticipated earnings reduction in 2023, we have reduced our debt to deliver our leverage targets. As you would expect, the cash that we used to reduce debt, generally reduces the amount of cash available for share repurchases. Over the long term, we remain committed to growing our cash dividend in alignment with our long-term EBITDA growth. Our dividends and share repurchase program are important levers to enhance shareholder value as is delivering quality customer service more efficiently than anyone in the marketplace.
With that, I'll turn the call over to Arun to walk through our efforts to strengthen our customer and carrier experience and improve our efficiency and operating leverage.
